In the 2018 budget the government announced a cap on payable tax credits* of 300% of a company’s PAYE/NIC liabilities as an anti-fraud measure and a way to prevent overseas companies setting up a shell UK company and then diverting the funds received from an R&D claim offshore.
However, there was concern the proposed cap would unfairly penalise small companies with few staff who use subcontractors for their qualifying R&D work and so the implementation of the cap was delayed whilst consultation took place.
The consultation has now finished and draft legislation has been published which confirms that the cap will now apply for accounting periods beginning on or after 1 April 2021 with the following amendments:
*A payable tax credit is a cash payment from HMRC generated by surrendering a company’s losses arising from an R&D claim.
Draft legislation can be fond here:
If you have any questions on the payable tax credit cap or anything R&D related, please get in touch.
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